TMI Blog2023 (7) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... on, recipient of service and supplier of service; it is evident that the transaction covered by the subject contract between the applicant and the Government in sum and substance confers the right to the applicant to extract the mud and sand lying underneath the reservoir of Mangalam Dam and appropriate the same by way of sale or otherwise during the term of the contract for a lumpsum consideration of Rs. 15 Crores payable in instalments spread over the contract period. Therefore, in the subject transaction the supplier of service is the Irrigation Department of the Government of Kerala and the recipient of service is the applicant. Classification and rate of GST of the service - HELD THAT:- The grant of the right to desilt the reservoir and to extract the sand and mud therein falls within the scope of; licensing services for the right to use minerals including its exploration and evaluation' as described in Heading 997337 of the Scheme of Classification of Services under GST - the service is appropriately classifiable under SAC 997337 and attracts GST at the rate of 18% as per entry at SI. No. 17 (viii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as the services are provided to the Irrigation Department which is under the direct control of the Kerala State? 3.2 Suppose the ruling for the above question is taxable, whether the applicant can pay the goods and services tax to the government under reverse charge basis as per SI. No. 5; i.e., Services supplied by the Central Government, State Government, Union territory or local authority to a business entity of Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017? 4. Contentions of the Applicant: 4.1. The applicant submits that they have been awarded a tender from the Irrigation Department of the Government of Kerala for the desiltation of Mangalam Dam, Palakkad on 19.10.2020. Subject to the terms and conditions of the tender, the department has allotted a desiltation right for using the surrounding of the reservoir. For exercising the right, the Irrigation Department has fixed a lumpsum consideration which is to be payable in instalment during the tender period. 4.2. They have undertaken the project in February 2021 and started their preliminary work to set up the machinery and all other equipm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm) is involved in the execution of such contract. Under their contract there is no material element involved and hence the same is not covered under the definition of works contract. Therefore, on detailed analysis of the various provisions it can be seen that the service is a pure service and the service recipient is the Government and hence they have satisfied all the conditions mentioned in the above notification for claiming exemption. 4.8. If the ruling for the first question is taxable, they can pay the tax on reverse charge basis as per Notification No. 13/2017-CT (Rate) dated 28.06.2017. The lumpsum payment is made to the Irrigation Department of the Government of Kerala and hence it is evident that the receiver of the consideration is the State Government. As per entry at SI. No. 5 of the above notification the tax on services supplied by the Central Government, State Government, Union territory or local authority to a business entity is to be paid by the recipient on reverse charge basis. In this case they are the recipient of services from the Government and hence the conditions mentioned in the above notification are satisfied for paying tax under reverse charge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lting the reservoir of Mangalam Dam, Palakkad for removing the mud and sand and taking the same for a lumpsum consideration of Rs. 15 Crores which to be payable in instalments during the period of contract. The question raised is regarding the classification; the rate of tax applicable and the person liable to pay the tax on the services rendered as per the tender awarded by the Irrigation Department. In order to answer the questions raised by the applicant it is necessary to determine the supplier of service and the recipient of service in the transaction between the Government and the applicant. To determine the supplier and recipient of service in the transaction, it is necessary to analyse the terms of the contract with reference to the definitions of consideration, supplier of service and recipient of service in the CGST Act, 2017. 7.2. The term consideration is defined in Section 2(31) of the CGST Act, 2017 as follows; (31) consideration in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the Supply of goods or services or bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of Rs. 15 Crores payable in instalments spread over the contract period. Therefore, in the subject transaction the supplier of service is the Irrigation Department of the Government of Kerala and the recipient of service is the applicant. 7.4. Having come to the conclusion that the recipient of service in the subject transaction is the applicant, the next issue to be decided is the classification and rate of GST of the service. The Scheme of Classification of Services is notified as Annexure to Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Chapter 99 - Heading - 9973 pertains to leasing or rental services and 997337 pertains to licensing services for the right to use minerals including its exploration and evaluation. As per the Explanatory Notes to the said Scheme of Classification of Services the Heading 997337 includes licensing services for the right to use, mineral exploration and evaluation information, such as mineral exploration for petroleum, natural gas and non-petroleum deposits. In the instant case the applicant has been awarded the right to desilt the dam and extract the sand and mud lying underneath for appropriation. The right so confer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation No. 13/2017 Central Tax (Rate) dated 28.06.2017 the tax in respect of services supplied by the Central Government, State Government, Union territory or local authority to a business entity shall be paid by the business entity located in the taxable territory on reverse charge basis. Therefore, the applicant is liable to pay the GST on reverse charge basis on the consideration of Rs. 15 Crores given to the State Government for grant of the right to desilt the dam and extract the sand and mud lying underneath for appropriation. In view of the observations stated above, the following rulings are issued: RULING Question 1: Whether we can avail the benefit of exemption notification Entry No. 3; Pure Services (excluding work contract services or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution vide Notification No. 12/2017 Central T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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